evaluation OF NON-WOOD FOREST PRODUCTS (NWFPs) TO FARM household’s income and food security in ENUGU state, Nigeria

evaluation OF NON-WOOD FOREST PRODUCTS (NWFPs) TO FARM household’s income and food security in ENUGU state, Nigeria

 

 

                        ABSTRACT

The study analyzed the contributions of plant and animal species of Non-Wood Forest Products (NWFPs) to farm household’s income and food security. Three agricultural zones, Nsukka zone, Enugu Ezike zone and Udi zone, were purposively selected for the study. One hundred and twenty (120) respondents were selected through multistage sampling technique. Descriptive statistics, and Probit model were used for the analysis. The results indicated that majority (63.33 %) were males, with a mean age of about 56 years. Most (53.3%) of the respondents were farmers. The average household size was about 5 persons. The respondent’s mean years spent in school was about 7 years (at least completed primary school) and belonged majorly (50.83%) to the medium wealth category. The most commonly collected plant species of NWFPs were bitter kola (Garcina kola), breadfruit (Treculia africana), bush mango (Irvingia gabonenesis and wombulu), kola nut (Cola nitida), cashew (Anacardium occidentale), Icheku (Dalium guinese), African star apple (Chrysophylum albidium), Avocado pear (Persea americana), African bush mango (Dacryodes edulis) and Oil bean (Pentaclethra macrophylla) while the most commonly collected animal species of NWFPs were bee products (Apis mellifera linneaeus 1758), flying termites (Reticulitermes flavipes) and fish (Ictalurus punctatus). Wealth category (p < 0.01) and occupation (p<0.01) positively and significantly increase the contributions of NWFPs to household food security. Educational level (p < 0.05) had negative and significant effect on the contributions of NWFPs to household food security. On the daily inclusion of NWFPs in respondent’s meals, NWFPs appeared in the meals of the households for a total of 2,150 times (78.5%). The result of the proportion of household food from NWFPs shows that 53.33% indicated that species of NWFPs constituted over 50% of their household food. Based on the food security analysis results, derived using the USDA (2000) approach, few of the urban farmers’ households (47.5%) were food secure, while most of them (52.5%) were food insecure at different levels of food insecurity. The result shows that 25.83% of farm households were food insecure without hunger, 25% were moderately food insecure with hunger and 1.67% was severely food insecure with hunger.  Household size and occupation positively and significantly (p < 0.01) increased the contributions of NWFPs to household income. On the market wares inclusion of NWFPs by households, NWFPs appeared in the market wares of the households for a total of 381 times (79.4%). The result of the proportion of household income from NWFPs shows that 54.43% indicated that species of NWFPs constituted over 50% of their household income. The extent of perceived impediments to the continuing use of NWFPs in the area was identified as underdeveloped market (3.44), lack of capital (3.26), lack of storage facility (3.33), poor transportation system (3.38), lack of adequate information (3.13), poor harvesting technique (3.56) and inefficient processing facility (3.2). Remedial measures such as the incorporation of NWFPs in national accounting systems in order to attract the deserved attention from policy makers, public enlightenment campaign on the economic and health benefits of NWFPs by the national orientation agencies and the provision of infrastructural amenities by the government and humanitarian organizations.

                                                                      

                                       

                                             

 

TABLE OF CONTENTS

                                                                                                                                            PAGES

Title page                                                                                                                                i

Certification                                                                                                                           ii

Dedication                                                                                                                             iii

Acknowledgement                                                                                                                iv

Abstract                                                                                                                                 v

Table of Contents                                                                                                                  vi

List of Tables                                                                                                                         ix

CHAPTER ONE: INTRODUCTION                                                                            

  • Background of the Study                                                                                     1
  • Problem Statement –           –           –           –           –           –           –                       4
  • Objectives of the Study –           –           –           –           –           –                       6
  • Research Hypotheses –           –           –           –           –           –           –                       6
  • Justification of the Study –           –           –           –           –           –                       7

CHAPTER TWO:  REVIEW OF RELATED LITERATURE                  

2.1       Conceptual Framework           –           –           –           –           –           –                       9

2.1.1    Non Wood Forest Products in Rural Livelihood and Economy        –                       9

2.1.2    Nigeria Forest Resources and Management   –           –           –           –                       18

2.2       Theoretical Framework                                                                                               21

2.2.1    Theories of Household Production Choices   –           –           –           –                       21

2.3       Analytical Framework                                                                                                26

2.3.1    Probit Model   –           –           –           –           –           –           –           –                       27

2.3.2    Likert Scale Rating Technique ……………………………………………                28

2.3.3   Food security status using the USDA approach                                                          29

 

CHAPTER THREE: RESEARCH METHODOLOGY

3.1   The Study Area   –           –           –           –           –           –           ……                            30

3.2   Sampling Procedure        –           –           –           –           –           –           ……                31

 

3.3   Validity and Reliability of instrument………………………………….      .                31-3

3.4    Data Collection –           –           –           –           –           –           –                                   31

3.5    Data Analysis……………………………………………………………….                32

CHAPTER FOUR: RESULTS AND DISCUSSION

  • Socioeconomic Attributes of the Respondents                                                               40

 

  • Gender of the respondents                                                                                       40

 

  • Age of Household heads                                                                                          40

 

  • Occupation of household heads                                                                               41

4.1.4    Household size                                                                                                            42

  • Years spent in school 42

 

  • Wealth category                                                                                                       43

4.1.7    Average income realized from spp of NWFPs                                                           44

  • Commonly collected NWFPs                                                                                        45

 

  • Plant species of NWFPs 45

 

  • Animal species of NWFPs `47

 

  • Perception of the respondents on the extent of certain impediments to the continuing use of NWFPs                                                                                                                           47

 

  • Contributions of NWFPs to household food security                         49

 

  • Contributions of NWFPs to farm household income                                                    52

 

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Summary                                                                                                                           55

5.2 Conclusion                                                                                                                        57

5.3 Recommendation                                                                                                              58

5.4 Suggestion for further Research                                                                                       59

   References                                                                                                                      

 

CHAPTER ONE

                                                       INTRODUCTION

1.1 Background of the Study

A forest, also referred to as a wood or the woods, is an area with a high density of trees. Depending on various cultural definitions, what is considered a forest may vary significantly in size and have different classifications according to how and of what the forest is composed (Lund, 2006). Forests can be classified in different ways and to different degrees of specificity. One such way is in terms of the “biome” in which they exist, combined with leaf longevity of the dominant species (whether they are evergreen or deciduous). Another distinction is whether the forests are composed predominantly of broadleaf trees, coniferous (needle-leaved) trees, or mixed.

 

The contribution of forests to sustainable livelihood of the rural farmers around the world is immeasurable including the wood and non-wood forest resources. Forests which include all resources that can produce forest products namely woodland, scrubland, bush fallow and farm bush and trees on farms, as well as ecosystem dominated by trees (Arnold,1998), provide households with income, ensure food security, reduce their vulnerability to shocks and adversities and increase their well being. Research on non-farm rural employment and income as a whole has shown that small scale production and trading activities in forest products constitute one of the largest parts of rural non-farm enterprise employment (Liedholm & Mead 1993). It is in acknowledgement of the importance of forests for livelihood and environmental stability that its conservation is included in the Millennium Development Goals of the United Nations. In Nigeria, poverty has led to the dependence of over 90% of the rural population on forests for some livelihoods and economic survival (UN, 2002).

 

Among the products obtained from forests are those classified as wood forest products and non-wood forests products (NWFPs). Non-wood forests products consist of goods of biological origin other than wood, derived from forests, other wooden land and trees outside forests (FAO, 1999). The United Kingdom‘s Forestry Commission defines non-wood forest product (NTFPs) as “any biological resource found in woodlands except wood (timber and other forms of wood), United Kingdom Forest Research (UFR, 2013). Part of the reforesting Scotland project, defines them as “materials supplied by woodlands – except the conventional harvest of wood, Scotland Forest Harvest (SFH, 2013). These definitions include wild and managed game, fish and insects, Center for International Forestry Research (CIFOR, 2013). When wood other than timber is included it is referred to as non- timber forests products (NTFPs). Generally NWFPs are grouped into: sponges, chewing sticks, tooth cleaners, fibers, bast fibers, jute, cloth, foodstuffs, water, beverage, wine, medicinal plants, latex, rubbers, gums and resins, and decorative beads (Wyatt, 1991). Furthermore, a large portion of NWFPs have medicinal properties. For at least three quarters of the world’s population, traditional medicine is the only source of medicinal treatment (70-80% in Africa) (Van Rijsoort & De pater, 2000). On the use of NWFPs in meals, observation of household in Western Burkina Faso identified that some thirty NWFPs were used, raw or cooked, and that they came from17 tree species of the savanna or traditional forestry parklands (Lamien &  Bayala, 1996). This study will focus on flora(plant) and fauna(animal) species of non-wood forest products. Some of the plant species of NWFPs found in Nigeria, according to Osemeobo and Ujor(1999) include Gnetum africanum , Gongronema latifolium, pterocarpus soyauxii, Ocimum gratisimum, Treculia Africana, Irvingia gabonensis, Dennettia tripetala, chrysophyllum albidium (white straw apple) , piper guineense, Afromomum spp and Garcinia kola. Fauna species include snails, bee product (honey), grass cutter etc.

 

Non-wood forest products have attracted considerable global interest in recent years because of increasing recognition of their contribution to household economies and food security to some national economies and to environmental objectives such as the conservation of biological diversity. Some 80 percent of the population of the developing world use NWFPs to satisfy health and nutritional needs (UN, 2002). Indigenous population in Nigeria have benefited historically from natural ecosystems through the use of NWFPs. Although NWFPs typically lack statistics on official commerce, they provide a wide range of raw materials and inputs for a diverse array of rural enterprise. Non-wood forest products provide off-farm employment to a large segment of the rural population and account for an enormous share of household income. For example, in 1996 in southeastern Nigeria, 35.7% of the rural population collected NWFPs daily and it accounted for 94% of total income from minor sources (Nweze & Igbokwe, 2000).

 

Bisong and Ajake (2001) found out that women in southern Nigeria depend heavily on NWFPs. In fact, many Nigerians depend on NWFPs for food, fiber and herbal medicines. In recent times, there has been a reasonable and noticeable shift from the earlier bias in favor of orthodox medicine to greater acceptance of traditional(herbal) medicines in Nigeria as in many other countries worldwide(Akunyili,2003). Over 90% of Nigerians in rural areas and over 40%  in urban areas depend partly or wholly on traditional medicine(Osemeobo & Ujor,1999). NWFPs also provide raw materials for large-scale industrial processing including processing of internationally traded commodities such as foods and beverages, confectionery, flavorings, perfumes, medicines, paints and polishes. At present at least 150 NWFPs are significant in terms of international trade; they include honey, gum arabic, rattan and bamboo, cork, forest nuts and mushrooms, essential oils, plant and animal parts for pharmaceutical products. Thus promotion of NWFPs can complement the objectives of rural development and appropriate forest management (Hammet, 1993). Since the early 1990s, the role of Non-Wood Forest Products for sustainable forest management and poverty reduction has received increased attention (Sheil & Wunder, 2002). They play an important part in supporting household livelihoods and therefore can be used to raise the perceived value of forest resources. In developing countries, including Nigeria, majority of rural household and a large proportion of urban household depend on NWFPs to meet some parts of their nutritional, health, construction material and income from selling these products. Elsewhere, NWFPs are the only source of income for the local communities (Wollenberg & Septianinawir 1998). Therefore, NWFPs form an integral part of the rural economy where the majority of the rural populations live especially around the forest resource base. In this perspective, sustainable forest management will be achieved through encouraging participatory management of forest and woodland resources.

 

FAO, (2002) defined food security as a situation that exist when all people, at all times, have physical, social, and economic access to sufficient, safe, and nutritious food that meets their dietary needs and food preferences for an active and healthy life. Conceptually, food security is broken down into four different components – availability, access, utilization and vulnerability – each capturing different, but overlapping dimension of the phenomenon (Migotto, Davis, Carletto, & Beegle, 2007).  To date, a lot of people in the developing world are still suffering from malnutrition despite the efforts made and inclusion of food security as part of the Millennium Development Goals (MDG). Worldwide, approximately 840 million people are undernourished or chronically food insecure and as many as 2.8 million children and 300,000 women die needlessly every year because of malnutrition in developing countries (Guha-Khasnobis, Acharya, &, Davis, 2007).

 

 

The Thrust of this research is to evaluate the contributions of Non-Wood Forest Products (NWFPs) to farm household income and food security in Enugu state. This is with a view to gain better insight into farm household’s income and food security and an attempt to strengthen the link between development policies and food security.

 

1.2       Problem Statement

The need for increased vigor in striving to achieve food security became very prominent with the incessant food crisis, especially in the developing countries. World Bank (1986) defines food security as access by all people at all times to sufficient food for an active and healthy life.

Conceptually, food security is broken down into four different components – availability, access, utilization and vulnerability – each capturing different, but overlapping dimension of the phenomenon (Migotto, Davis, Carletto, & Beegle, 2007).  To date, a lot of people in the developing world are still suffering from malnutrition despite the efforts made and inclusion of food security as part of the Millennium Development Goals (MDG). Worldwide, approximately 840 million people are undernourished or chronically food insecure and as many as 2.8 million children and 300,000 women die needlessly every year because of malnutrition in developing countries (Guha-Khasnobis, Acharya, &, Davis, 2007).

 

In Nigeria, 65% of households in the Core Welfare Indicators Questionnaire (CWIQ) survey (NBS, 2006) had problems meeting food needs. In fact, the greatest percentage (25.27%) of the households indicated that the primary coping mechanism for poverty was reducing the number of meal, and 37% of the populations (47 million people) were unable to meet the 2,900 kcal food requirement in 2004 (NBS, 2004). Access to adequate and nutritious food is limited by low income and poverty especially as nutritious foods are sometimes expensive. Therefore promoting alternative sources and safety nets of food for the households is germane, although very little or no attention is being paid to Non-Wood Forest Products (NWFPs) by policy makers and analysts in Nigeria’s quest for food security, NWFPs have been an important source of food in Nigeria. NWFPs are exploited mostly by the rural poor who often fall back to or rely largely on the products in meeting their food needs. They are also very critical in forest and biodiversity conservation.

 

Despite the importance of NWFPs in household consumption and forest and biodiversity conservation in Nigeria, they have hitherto been given very little recognition especially by planners and natural resource managers in Nigeria (Adedoyin, 1995). Even in most forest sector policies, for instance in the Nigerian Environmental Policy, NWFPs is not mentioned. Wherever they exist, NWFPs get a mention in passing but without clear objectives, targets and strategies for development and conservation. National statistics hardly offer any reliable data to document their economic role. They are not taken into account in GDP calculations (Osemeobo & Ujor, 1999). It is important to note that indigenous knowledge of local use of species is a key issue in forest and NWFPs conservation and sustainable management (Nair & Merry, 1995).

 

In Nigeria this is of utmost importance as 70% of Nigerians live below poverty line and the majority depend on forest resources especially NWFPs for their survival. Neglecting the resource may deepen poverty. Neglecting to adequately recognize non-wood values of forests often denies the socioeconomic benefits of forests to those who depend on them. Therefore, development of appropriate management and conservation of NWFP resource, either in natural forests or in plantations are of importance as part of strategies to meet the economic needs of people while maintaining biological diversity (Reis, 1995). Furthermore information on production and local domestic consumption is strikingly lacking for most NWFPs (Reis, 1995). Preliminary investigation showed that with few exceptions, the NWFPs have never been studied in depth, neither in aspect of quantities produced nor their socioeconomic importance to the people. There is considerable ignorance in many quarters concerning the optimal utilization of this resource base to uplift the rural poor, while at the same time protecting biodiversity and ensuring sustainability (Taylor, Butterworth & Matoke, 1996).

 

 

There are several positive developments, which have been attained including the work by Chukwuone and Okeke (2012) Can non-wood forest products be used in promoting household food security: Evidence from savannah and rainforest regions of Southern Nigeria. Nzeh, Eboh, and Nweze(2015) Status and trends of deforestation: An insight and lessons from Enugu State. Despite that, there is still scanty information existing on the contributions of animal and plant species of NWFPs towards farm household income and food security and the perceived impediments to this role. Due to this knowledge gap, this research examines the contributions of NWFPs towards household income and food security and the limitations to this role in the study area. The research was therefore anchored on some questions; what are the Socio-economic characteristics that drive their collection of NWFPs? What are the NWFPs that drive the interest of the respondents? What is the contribution of NWFPs to household income? What is the contribution of NWFPs to household food security? And the extent to which certain factors impedes the development of NWFPs in the study area.

 

The findings of this study will provide the benchmark information for the initiation of appropriate and sound strategies and policy issues on NWFPs towards farm household income and food security of non-wood forest resources.

 

 

1.3     Objectives of the Study

The   broad objective  of  this  research is to  evaluate  the contributions  of  NWFPs  to the income and food security  of  the farm household in Enugu State. The specific objectives were to:

(i)  describe the socio-economic  characteristics of the farm households in the study area;

(ii)  identify and characterize commonly used NWFPs;

(iii) determine the contributions of NWFPs to farm household’s income;

(iv) determine the contributions of NWFPs to farm household’s food security;

(v) identify the extent of  perceived impediments to the continuing use of Non-Wood Forest Products(NWFPs) in the study area;

 

 

1.4     Research Hypotheses

This study was   guided by the following null research hypotheses:

  • HO1: There is no relationship between the Socio-economic characteristics of the farm household and the degree of contribution of NWFPs to farm household’s food security.
  • HO2: There is no relationship between the Socio-economic characteristics of the farm household and the degree of contribution of NWFPs to farm household’s income.

 

1.5     Justification of the Study

The study was justified by the fact that most forest management strategies are focused on timber based products to the neglect of NWFPs. There is abundant  knowledge on managing forests for wood products but very little information exists on managing forests for edible medicinal or floral parts (Chamberlain et al., 1998). Although the great potential of managing NWFPs has been frequently emphasized, (peters, 1990; & FAO, 1993), rarely has this objective been achieved (Reis, 1995). Silvicultural prescriptions for natural forest ecosystems that include NWFPs are severely lacking. Notwithstanding some agro forestry systems are available, for example wind breaks and alley farming that includes a NWFPs component, much more work is needed to develop a comprehensive body of knowledge on how to manage forest resources for NWFPs (chamberlain, Bush & Hammet, 1998). There is need to enhance knowledge about NWFPs resources, promote the domestication and utilization of commercially viable NWFPs yielding plant species and conserve natural forests and their species richness (Reis, 1995).

 

Analysis of the contributions of NWFPs in natural forests (in-situ) is justified by the fact that an estimated 80% of the plant species providing NWFPs are found only in biological richness and ecological complexity of primary/secondary forests; some of them can only thrive in natural habitat and do not lend themselves  to domestication(Reis,1995). Moreover, the major collection of NWFPs is not in pristine forests but in secondary forests, bush fallow or farm bush or from trees planted in farm. With shortened fallow periods due to increased agricultural activities, including land clearing, secondary forests, bush fallow and farm bush are likely to diminish hence there is need to conserve forests, and establish and manage common pool tree resources. To enable sustainable development of community forestry, it is thus important to consider what kind of indigenous community forestry systems exists in a specific region and what their dynamics are; such understanding will inform decisions about how to balance the local and professional norms and values(Wiersum,1999).

 

Furthermore this study is justified by the fact that information on production and local domestic consumption is strikingly lacking for most NWFPs (Reis, 1995). Preliminary investigation showed that with few exceptions, the NWFPs have never been studied in depth, neither in aspect of quantities produced nor their socioeconomic importance to the people. There is considerable ignorance in many quarters concerning the optimal utilization of this resource base to uplift the rural poor, while at the same time protecting biodiversity and ensuring sustainability (Taylor, Butterworth & Matoke, 1996). Although, some efforts have been made since Rio earth summit and convention on Biodiversity, considerable effort is still needed at local, national and international levels for policy development for undertaking proper assessment of NWFPs, wealthy research for optimal use of such products as well as in-situ and ex-situ conservation. The situation of NWFPs in Nigeria would be improved through application of intensive research and smallholder farmer involvement in in-situ conservation (Osemeobo &  Ujor, 1999).

 

It is equally important to gain understanding of the way the significance of NWFPs varies between the poor and wealthy sections of the population (Van Rijsoort, 2000). This makes it easier to determine which NWFPs should be focused or in order to help the poorer section of the population. It is also important to understand the effect of increased prosperity on NWFPs use so as to be able to estimate the consequences for forest management

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Analysis of fluted pumpkin production in isoko north local government area

Analysis of fluted pumpkin production in isoko north local government area

CHAPTER ONE/INTRODUCTION

 Background of the study

Fluted pumpkin is a very important vegetable that is popular in West Africa. It belongs to the family Telfaria Occidentalis Hook F. cucurbitaceae. It is a leafy vegetable that produces fruits. (Enabulele and Uavbarhe,  2001). Tindall, (1989) defined leafy vegetables as herbaceous plants used for culinary purposes. They are used to increase the dietary quality of soups. The fruit on full maturity has a weight of 10kg. and an appearance of 10 distinctive longitudinal ribs on the surface. It is popular in West Africa. The edible part of this vegetable are the large red seeds, leaves and young shoots used for traditional soup. Protein rich seed can be roasted or grounded for use in porridge. The flesh of the fruit has good oil content which can be used as cooking oil. Although fluted pumpkin is a minor oil crop it possesses healing properties that have been found effective in boosting blood levels and also in maintaining bone mineral density in older men when more of the seeds are consumed. It’s important role in ensuring food security for the populace has not been overlooked by the present administration through the 7 point agenda. Fluted pumpkin consumption has improved over the years and it is an important component of the daily diets of Nigerians (Okoli and Mgbeogu, 1983). Due it’s hypolipidemic action, it lowers blood cholesterol and thus protects from a large range of associated complications like cardiac problems, hypertension and diabetes Margret, (2011).

The joint FAO/WHO 2003 consultation on diet, nutrition and prevention of chronic disease recommended a minimum intake of 400g of leafy vegetables which helps in preventing and managing of nutritional and also health related diseases that are rampant in rural areas. According to Chweya and Denton (2000) the nutritional contribution of fluted pumpkin is essential for good health and growth among lactating mothers. The seed of fluted pumpkin contains essential nutrients in significant amounts which can supplement other foods (Christian and Ejeafehe, 2007). It has been shown that adding fluted pumpkin seeds to diet compares favourably with conventional drugs in reducing inflammatory symptoms of arthritis (Doan, 2008).

According to Koomolafe (1978), the uses of vegetables include:
Practical study of crop plants in school gardens, good sources of food, reasonable income by selling the vegetables.
Other uses of vegetables have emerged due to recent studies. They include:

  1. Medicinal value of some vegetables compare favourably with conventional drugs.
  2. Planted as cover crops that helps prevent and reduce soil erosion and leaching and also they out compete weeds (reducing the need for pesticides)
  3. Mitigate global warming by carbon sequestration.
  4. Vegetables have deep and extensive root system that can hold soil to capture dissolved nitrogen before it can contaminate ground and surface water.

Apart from fluted pumpkin, other vegetables produced in  isoko north local government area include water leaf, bitter leaf, green
leaf (African spinach), Okro, pepper etc. Fluted pumpkin producers in the study area are faced with challenges of seedbed preparation, seedlings, pest management, fertilization, harvesting, transportation, processing and marketing as other farmers.( Awerosuo, 2008).

The problem assumes more importance as vegetables compete for the scarce farm resources including land, labour and capital. It is therefore necessary to examine and evaluate the economics of fluted pumpkin production in view of the resources constraints by farmers.

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COMMERCIAL BANK CREDIT ON AGRICULTURE AND AGRICULTURAL OUTPUT IN NIGERIA

COMMERCIAL BANK CREDIT ON AGRICULTURE AND AGRICULTURAL OUTPUT IN NIGERIA

CHAPTER ONE INTRODUCTION

  • BACKGROUND TO THE STUDY

 

Agriculture also called farming or husbandry is the rearing of animals and cultivation of land to produce food, biofuel and other products used to sustain life. Agriculture was the key in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the development of civilization. The study of agriculture is known as agricultural science. The history of agriculture dates back thousands of years, and its development has been driven and defined by greatly different climates, cultures, and technologies.

As confirmed by Ugochukwu (1999), agriculture is the first and most thriven occupation of mankind. From its early form of wild fruits, leaf, root, snail and insect gathering, fishing and hunting, to its present mechanized and almost automated form, it has undergone a lot of development

Okah (2007) conceived agriculture as the cultivation of land, raising animals for the purpose of production of food for man, feed for animals, and raw materials for our industries. It also consists of crop production, forestry, livestock and fishing. It is also essential for expansion of employment opportunity, reduction of poverty and improvement of income distribution,

 

speeding up industrialization and easing the pressure of balance of payments disequilibrium.

The role of agriculture in transforming both the social and economic frame work of an economy cannot be over emphasized. Anyanwu (1997) posits that ―agriculture has been the main source of gainful employment from which Nigeria nation can feed its population, providing the nation‘s industries with local raw materials and as a reliable source of government revenue. Corroborating the above is Reynolds(1982) who asserts that agricultural development can promote the economic development by increasing the supply of food available for domestic consumption and releasing the labour needed for industrial employment.

The major agricultural export commodities in Nigeria include cocoa, coffee, cotton, groundnut, groundnut oil, palm kernel, soya beans, ginger rubber, and chili pepper (CBN,2003). There are other commodities that are being demanded in the world market such as cassava and cassava products, banana, plantain and so on. The Nigerian economy until today is still dependent on primary products both as foreign exchange earner and as major component  of its gross domestic product (GDP). Olurosunsola (1996) attributes this to the fact that the main interest of the colonial masters was and still is the exportation of products needed for their home industries.

 

The continuous production and exports of the agricultural product played a dominant role in attracting foreign exchange to boost economic activities from independence to the early 1970s. Obadan (2000), observed that palm oil accounted for 96.4% of total exports earnings while non- oil export product accounted for 97.3% for total export then. He observed further that from the 1970s, the Nigerian economy became mono-cultural, having been transformed from one dependent on fairly diversified portfolio of agricultural products to an economy heavily dependent on crude oil for growth and sustenance. Oyo (1994) observed that the advent of crude petroleum production and related activities especially in the early 1970‘s changed radically the structure of Nigeria economy. The huge foreign exchange earnings from crude oil export encouraged importation of finished foods to the detriment of domestic manufactured ones, while the agricultural sector was rendered less competitive over time through over-valued currency, inappropriate pricing policies and scarcity of farm labour caused mainly by the migration of youth to urban areas in search of paid employment.

Nigeria‘s agriculture is divided into two types, the subsistence agriculture and commercial agriculture-: the subsistence agriculture is the type of farming which involves only the farmer and his family i.e the farmer produces for himself and his family with little or none to sell in the market. It is practiced in small scale system. It requires only a little amount of money to practice unlike

 

commercial farming that involves huge amount of money to operate. It does not require machinery or heavy equipment, since the land is very small and fragmented (Ameachi 2004).

The second type is commercial agriculture, and this is where a farmer produces his crops and sells them in the market. It is carried out in large scale with enough land and machineries. These machines are used in cultivating crops. It involves a lot of capital and time, and also increases the farmer‘s income.

Credit is considered as a catalyst that activates other factors of production and makes under-used capacities functional for increased production, Ijere (2013). Thus farm credit plays a crucial role in agricultural and rural development as it enables farmers reap economies of scale, venture into new fields of production, employ new technologies and empower them to provide utilities for a widening market.

Agricultural credit is often seen as any of several credit vehicles used to finance agricultural transactions, including loans, notes, bills of exchange and bankers acceptances. These types of financing are adapted to the specific  financial needs of farmers, which are determined by planting, harvesting and marketing cycles. Agricultural credit enhances productivity and promotes standard of living by breaking vicious cycle of poverty of small scale farmers. Adegeye and Ditto (2005) described agricultural credit as the process of obtaining control

 

over the use of money, goods and services in the present in exchange for a promise to repay at a future date.

Ogunfowora (2003) reported that credit is not only needed for farming purposes, but also for family and consumption expenses; especially during the off season period. Credit has also been discovered to be a major constraint on the intensification of both large and small scale farming (Von – Prischike 1991).

Nigeria is blessed with lots of natural and human resources, yet, the citizens live in abject poverty for several known and unknown reasons. The country discovered oil in 1959 at Oloibiri in today‘s Bayelsa State, over fifty years ago, but over 70% of the country‘s earnings come from oil, paying little or no attention to other sectors of the economy and that is why Nigeria is said to be suffering from the ―Dutch Disease‖.

Over the years, government has been able to come up with policies, schemes and palliative measures to assist rural farmers in enhancing productivity. Some of these schemes include the agricultural credit guarantee scheme established in 1977, the agricultural credit support scheme, commercial agriculture credit scheme and the licensing of Micro Finance Banks.

In agriculture, fund is needed to enable the farmer purchase more land, buy his inputs at the appropriate time and to pay for hired labour or farm machinery. Unfortunately, credits are not easily available for most of the

 

farmers because of collateral and other things that are usually required by the commercial banks and other credit institutions. This makes difficult for large scale agricultural investment in Nigeria.

With the recent move by the leading country of the world to diversify their economy, Nigeria is conscious of the danger signal this portray and this underscores the need to move away from total reliance on petroleum related revenues. These signals according to Soludo (2009) include the on-going global economic crisis that is threatening the growth and development agenda of the present administration, the crisis in the Niger delta which has interrupted petroleum operations in the past few years, and the frightening revelation that the United States of America, the highest buyer of Nigeria crude oil, Brazil and several other countries are seriously engaged in research for an alternative source of energy.

Hence, the need to diversify Nigerian economy, especially Agricultural sector that has for long, been neglected.

The structure of the Nigerian economy is multi-sector in which the banks and the agricultural sectors have roles to play. Long before now, the relationship between the banking industry and the agricultural sector in Nigeria has been a contentious issue. If one were to take a census of all the pronouncements on the matter by various governments since independence and classify them into those praising the efforts of the banking industry and those castigating them as

 

regards granting credit to agriculture may likely notice that the ratio of those in favour of the later will be in the ratio of four or more is to one. This could further be reflected in the legislation of governments and the directives of quasi government institutions like the CBN on the issue. The setting up of a wholly government owned bank in the name of the Nigerian Agriculture, Cooperative and Rural Development Bank (NACRDB) with an aim of solely lending to agricultural endeavours on short, medium and long-term basis is predicated on the philosophy that the mainstream banking industry does not adequately cater for the urgent need of credit required for rapid transformation of the agricultural sector of the economy.

          STATEMENT OF THE PROBLEM

 

Several researches have shown that Nigeria Is endowed with huge expanse of fertile Agriculture land, rivers, streams, lakes, forest and grassland, as well as a large active population that can sustain a high productive and profitable agricultural sector. Adubi (2000) admits that this enormous resource base if well managed could support a vibrant agricultural sector capable of ensuring self- sufficiency in food and raw materials for the industrial sector as well as, providing gainful employment for the teeming population and generating foreign exchange through exports.

In spite of these endowments, the sector has continued to record a declining productivity. The capacity of the sector to fulfill its tradition roles in

 

Nigerian economy has been constrained by various social-economic and structural problems such as: Unavailability of credits to local farmers; The discovery of oil (the oil boom of the 1970 created relative disincentives for agriculture in relation to other sectors of the economy); High interest rates on loans to farmers; Rural- urban migration; Ineffective institutions charged with policy implementations. Others includes: inadequate number of beneficiaries; interest rate problem; uneven distribution of agricultural credit; inadequate monitoring and evaluation; underdeveloped production base; weak agricultural policies; high default rate; and uncoordinated credit policies; inadequate generation of income and savings; unstable macroeconomic policies and transaction costs.

Not until recently, have government seriously thought and attempted to mobilize potential savings for the rural farmers. Commercial banks themselves have given little attention to the approval of loans to farmers for fear of defaults. Where credits are received from other sources apart from government and commercial lending, the interest rates have been too high. These reported high interest rates are stark realities to the peasant farmers. However, Ogunfoworaetal (1972:35) attributed most of the short comings on institutional credits in Nigeria to factors such as, ineffective supervision or monitoring insufficient funds, political interference, cumbersome and time consuming loan processing, large loan defaults and absence of financial projections. There is

 

thus the research need to examine the impact of and the financial market performance in terms of the spate of government intervention measures and how these have affected the credit access or constraint facing farm households in Nigeria.

This study intends to answer the following questions: How have  the credit institutions, especially commercial banks, been able to impact positively on the level of agricultural productivity in Nigeria amidst aforementioned problems? Is the high interest rate on loans given to farmers really preventing them from borrowing from credits institutions? Or are the commercial banks afraid of fraud, the risk of not paying them back the loans? Is inflation eroding the value of the amount of credit needed to boast agricultural output? Is market failure the problem of low productively in Nigeria Agricultural sector?

         OBJECTIVES OF THE STUDY

 

The broad objective of the study is to investigate the extent to which commercial bank credit had supported agriculture and agricultural output in Nigeria.

However, the specific objectives of the study are as follows.

 

  1. To determine the impact of commercial banks credit on agriculture and agricultural output in
  2. To determine the impact of interest rate on agricultural output in Nigeria

 

  1. To determine the impact of inflation rate on agricultural output

 

  1. To determine the impact of exchange rate on agricultural output

 

 

 

 

               HYPOTHESIS OF THE STUDY

 

Following from the above stated objectives, the following null hypothesis are tested in this study;

  • Commercial banks credit has no significant impact on agriculture and agricultural output
  • Interest rate on bank credit to Agricultural sector does not have significant impact on Agricultural output
  • Inflation rate does not have significant impact on Agricultural output in Nigeria
  • Exchange rate does not have significant impact on Agricultural output in Nigeria

 

 

 

          SIGNIFICANCE OF THE STUDY

 

Agriculture is expected to make significant contribution to net foreign exchange earnings and enhance Nigerian economic growth. This study sets is to

 

reveal the important problems and prospect of the agricultural financing and economic growth in Nigeria. It becomes important to carry out a research on this area of study so as to suggest ways of combating the perceived problems of the peasant scale farmers, such as, loan procurement, and effective credit lending to the benefit of the local farmers. Also, it sets out to help proffer solutions to the problems being faced by the sector.

This study will serve as a good background for those intending to carry out further research work on related topics.

 

 

 

          SCOPE OF THE STUDY

 

This is an investigation into the impact of commercial bank credit on the agriculture and agricultural output in Nigeria for the period 1980-2013.

                        LIMITATIONS OF THE STUDY

 

There are several limitations to the study of this work. Limitations include the unavailability of some vital materials as they are considered highly confidential by government agencies; time constraint; financial constraint and also library facilities have been very inadequate in journals.

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EFFECTS OF MIGRANT REMITTANCES ON FARM HOUSEHOLD WELFARE IN NIGERIA

 

CHAPTER ONE

INTRODUCTION

1.1       Background Information

Remittances have been defined as the proportion of migrants’ earnings sent from their destination of employment to their origin or communities (Samal, 2006). As financial flows that do not require a quid pro quo in economic value, they can be termed transfer payment in Balance of Payment Accounting. Remittances are considered as compensation (brain gain) for the loss of human capital (brain drain) by a net labour exporting country (Ratha & Xu, 2006).  Relevant classification of remittances include: monetary versus non-monetary remittances; domestic versus international remittances, and inward versus outward remittances. The principal concern in this research is monetary- international-inward remittances to Nigeria. Domestic remittances will also be important elements of analyses.

Remittances are normal concomitant to migration which has been an integral part of human history.  For example, Italy enacted a law to protect her remittance inflows in 1901 and remittances were also vital in her post-1945 development (Miluka, Carletto, Davis & Zezza, 2007). In Spain,  rural banks and credit unions were formed after the second World War to receive much-needed foreign currency sent home by migrants working in the US and South America (Miluka et al, 2007). In recent history, declining wages, increasing unemployment and underemployment motivated further migrations of skilled and unskilled labour from the agrarian sector of the developing countries to the advanced world.

Globalization, accentuated by economic integration, collapse of many international trade barriers with a somewhat relapse of tight immigration laws made migration even more pronounced with a commensurate growth in remittances. Given their fast growths in the last 2 decades, remittances are now recognised as the foremost benefits of migration. They have also attracted attention in empirical studies with some concentration on their determinants and developmental impacts (Adenutsi, 2010). Also, a few multilateral, bilateral and governmental initiatives on remittances are emerging. Some of them are discussed in chapter 2.

Developing countries as a whole have consistently been the largest recipient of international remittances in the world. Formal remittance flows to this region is twice as large as Official Development Assistance (ODA) and nearly two-third of Foreign Direct Investment (FDI).  Between 1995 and 2005 the total amount of official migrant remittances received by developing countries increased by more than 300% (Adenutsi, 2010). Remittances to developing economies reach US$338 billion in 2008, higher than its estimated value of US$328 billion (World Bank, 2009). The actual total amount of migrant remittances received by developing countries is much higher. It is probably 2.5 times the amount of official flows since a significant amount of these transfers is likely sent through the informal channels (World Bank, n.d. as cited in Mutume, 2005).

Nigeria received US$1.92 billion as remittances in 1997, a value that is incomparable with the US$20 million received 20 years earlier (1977) (IFAD, 2006).  The country received 65 per cent of remittances to Sub Saharan Africa in 2000 (World Bank, 2002 in: Orozco, 2005), with most migrants sending between 2000 and 3000 US$ (20 and 30 per cent of their earnings) per year (Ruiz-Arren, 2006). Annual estimates exceeded $1.3 billion, ranking second only to oil exports as a source of foreign exchange earnings for the country in 1997 (Mutume, 2005). Nigeria was the sixth highest destination of remittances from citizens of developing nations in the diaspora (Mobile Money Africa, 2009). The nation received $3.3billion in remittances which accounted for 3.4 per cent of the GDP and seven times the value of ODA to the country in 2005 (IFAD, 2006). Nigeria ranked third largest recipient in Africa in 2006, receiving US$ 5.397 billion (36 percent of total remittances to the continent) (Ruiz & Vargas-Saliva, 2009).

Approximately 55 percent of total remittance flows to Nigeria come from the United States and 10 percent from the United Kingdom. Significant inflows also arise from Germany, Greece, Italy, Netherlands, Spain, South Africa and Ghana (Hernandez-Coss & Bun, 2007). The relative participation of Money Transfer Operators (MTOs) in the Nigerian remittance market include: Western Union (47 percent), Moneygram (35 percent) and Coinstar (17 percent) (IFAD, 2009). Eighty one percent of formal remittances coming into Nigeria are transferred through banks (IFAD, 2009). This creates incentive for savings by the unbanked remittance recipients. Bank bound remittances are also beneficial to the recipient households in terms of creditworthiness. Moreover, it places capital at investors’ disposal thereby contributing to national development.

Chami et al (2005) found that most migrants send money home for family maintenance based on altruistic motives; making family ties important motivations for remitting funds from abroad (as cited in Mallick, 2008). In contrast, migrants who invest the remittances on real estate or physical capital, do so with profit motive, and conform to the self-interest theory of remittances. Other variant theories of motivation to remit include:  implicit family agreement (co-insurance and loan), migrant’s saving target and portfolio management decisions.

 

Remittances have been found to be a more reliable and less variable source of funds from year to year than ODA and FDI (Ross, Forsyth & Hug, 2009 in Abdih et al, 2008). They provide a bottom-up approach to delivering resources to those who actually use them, and by-pass costly bureaucratic and administrative procedures associated with most development assistance. They are person-to-person flows, well targeted to the needs of the recipients, who are often poor. This makes remittances very important source of finance for the rural households traditionally known for high level of poverty and low access to foreign aid, government grants or bank loans. Remittances to rural areas are significant and predominantly related to intraregional migration in Africa. Two-third of Nigerians and other West African migrants in Ghana, for example, remit to the rural areas of their countries of origin (IFAD, 2010).

As Lennart Bage, the president of IFAD would say, “remittances represent a lifeline to struggling economies,”  during an economic downturn in the home country, increased remittances, an equivalent of a private “welfare payment” are sent from abroad to help smoothen consumption of the recipients (Martin, 2005). Welfare in this context represents wellbeing of remittance receiving households, measurable in terms of the total households’ consumption expenditure (Duong, 2003). Another definition of welfare which may be considered as a function of sustainability is relative poverty (Foster, Seth, Lokshin & Sajaia 2013). In this research, relative poverty was analysed from the perspective of consumption distribution.

It has been reported that remittances stimulate consumption and investment notably in sub-Saharan Africa and South Asia, as well as contribute to households’ welfare (Osili, 2007 & Siddiqui, 2008). Precisely 5.5% of the average household income in Nigeria was from remittances. And recipient households seem to have better access to food and nutrition than non-recipients households (Oseni & Winter, 2009 as cited in Babatunde & Martinetti , 2010). Also, 61 percent of a group of Nigerians in diaspora remit for sustenance of those at home (DFID, 2005), implying that remittances could alleviate food insecurity thereby enhancing the welfare of the households. This view is further warranted given that international remittances had ameliorative effects on rural poverty in Western Nigeria (Olowa & Olowa, 2008); and decreased income inequality in rural Nigeria (Babatunde, 2008).  This is corroborated by World Bank (2009) claim that meeting consumption needs including health care and education constitutes 80-90 per cent of remittance spending.

In spite of the fact that only 10 to 20 percent of remittance spending constitutes savings and investments whereas a whopping 80 – 90 percent goes for consumption spending (World Bank, 2009), remittance spent on consumption cannot be classified as unproductive. This is because remittance pushed consumption still leads to economic growth as consumption creates investment demand through its multiplier effect. Buttressing this fact are significant empirical evidences pointing out that remittances lead to positive economic growth, be it through increased consumption, savings or investment (Mallick, 2008). At the microeconomic level, for example, increased household spending on consumption in form of healthcare, schooling and housing can have important favourable effects on human capital and productivity. This implies higher labour efficiency and greater outputs for remittance receiving farming households.  Positive multiplier effects will also help to spread the benefits to non-migrants’ households. These ripple effects that impact the extended family and community beyond the receiving households, is due in part to the increased consumption. The combined effects of remittances on investment and consumption can further increase output and growth.  They can boost aggregate demand and therefore output and income with a multiplier effect as high as 1: 3 or even more (Van Doorn, 2003 as cited in Thao, 2009). Remittances can therefore be associated with better development outcomes.

Remittances also contribute to development by providing a stable flow of funds that are often counter-cyclical (i.e. they increase during times of economic downturn). They help poor families deal with negative economic shocks (World Bank, 2009). Remittances enable the hitherto risk averse farming households insured by remittances, to shift their portfolios towards riskier investments (Paulson & Miler, 2000 as cited in Chukwuone et al, 2007). By diversifying risk and relaxing liquidity and credit constraints through remittances, migration can be seen as part of a household strategy to overcome these restrictions, thus inducing productive investments (Miluka et al, 2007). Remittances are therefore an important informal insurance strategy.

Gender mainstreaming of remittances could have significant impact on the households as well as on the macro economy. IFAD (2007) found that slightly more women than men receive remittances, whereas average volume of remittances received was higher for men than women. Women spend most of their remittances on their families’ basic needs while men spend more on non-necessities (IFAD, 2007). However, if women succeed to cover basic consumption needs, education and health, they invest in building project or in land for agriculture (UN-INSTRAW, 2009). Nigerian evidence shows that although women may neither save nor invest remittance income as much as men, they use the funds to realise the welfare goals of the households than men. In a study of US-Nigeria remittance corridor, it was found that if the sender is a spouse of the recipient, the amount sent is on average 2.2 percent higher than the amounts sent by other family members and friends, with wives sending slightly more home than husbands (Orozco & Millis, 2007). Also poorer origin-families (often headed by women) in Nigeria received larger transfers (Osili, 2006).  Gender interactions are hence, a vital force in the concurrent realisation of the welfare and developmental goals of remittances in the agrarian economy.

Considering its beneficial impact on poverty and gender, remittances can foster the realisation of MDGs 1 and 3: to eradicate poverty and hunger; and to promote gender equality and empower women.  Although, remittances would not replace aids or credit schemes, they could be included in future NEEDS and SEEDS which are medium-term economic strategies for tackling Nigeria’s economic and structural problems and reduce poverty. In line with this idea, NEEDS document states that “if appropriate incentives are in place, the brain drain of Nigerians could be turned into a brain gain through increased remittances (Nigerian National Planning Commission, 2004). The lofty prospects enumerated about remittances can be brought to fore by policies that ensure the sustainability of its inflows. Sustainability here does not only mean stability of remittance flows, it also entails the inequality reducing effect and the spread of remittance outcomes beyond the recipients’ households thereby guaranteeing long-run impact”.

Sustainability of remittance flows will depend on the consideration of opportunities such as: strengthening the financial sector, banking in the rural areas, deregulating the remittance market (increase competition and lower costs), disseminating technology (SMS and Internet) to the rural remittance recipients, and leveraging the informal remittance transfer mechanism (Hanson, 2008). The informal systems of remittance transfer currently work efficiently and reliably, particularly for small transfers to the rural areas. Developing or integrating this system with the formal transfer mechanism will further promote remittance flows to the rural areas. There is need for greater involvement of credit unions, micro-finance institutions and migrant associations in leveraging remittances for development. Importantly, the preceding step will be to evaluate the present and potential welfare effects of remittances to assure us that these lofty policies are warranted. This research is therefore meant to begin the process.

 

1.2       Problem Statement.  

Osili, (2007) found that households domiciled in the Nigerian rural sector received significantly less remittances than their urban counterpart from the U.S.  More revealing is the fact that, only between 30 and 40 per cent of all remittances are destined to rural areas (Africa-Focus, 2010), whereas the greater per cent of the population dwell there. Such disparity in remittances distribution among household categories makes the effect of remittance on welfare inequality uncertain. Another issue is that women headed households do not always benefit substantially from the results of migration because newly created jobs stemming from remittances are often primarily for men, while women tend to be stuck in traditional forms of employment (Georges, 1990 as cited in Vargas-Lundius, 2004). Meanwhile, gender-based studies showed that the incidence of female-headed households was much higher in migrant families than among families without migrants (Torres, 2000 as cited Vargas-Lundius, 2004).

Therefore, skewedness of remittance distribution in favour of certain categories of households is a key challenge to the widespread of the effect of remittances. Hence, this research attempted to find out if skewedness actually existed in remittance distribution among Nigerian farm household categories with a view to addressing it.

Comparatively small consideration has been given to the question of how remittances are used by the households and the impact of the remitted money on the livelihoods of the migrants’ origin families. Particularly, the optimists’ philosophy about remittance impact may not hold in the agrarian sector because negative lost-labour effects of migration are likely to be concentrated in this sector, where most migrants are employed prior to migration (Lindley, 2008). This could be associated with the fact that positive remittance effects may manifest themselves in other sectors, where the returns from investing may be high and family labour demands low relative to agriculture.  However, remittance effects on household welfare remained a speculation in the rural Nigerian context.

Remittance effects remained a speculation because minimal research attention has been devoted to the welfare effects of remittance income in developing countries (e.g. works of Adams & Page, 2005; Adams, 2004, Guptal et.al, 2009), including Nigeria. Issues relating to remittances and welfare in Nigeria have been addressed to some extent by a few research works. Almost all of such works were enclave and do not clearly reflect the Nigerian situation.  Examples are works of: Olowa & Olowa (2008), Osili (2007), Babatunde & Martinetti (2010) and those of Nwaru, Iheke & Onyeweaku (2011). Chukwuoene, Amaechina, Iyoko, Enebeli-Uzor & Okpukpara (2012) did a comprehensive study covering Nigeria but it needs to be validated by a more recent study considering that data were derived in 2004. This study employed data from the

General Household Survey conducted in 2010/2011 in addition to the 2004 data.

Banks are the main entities allowed to perform remittance transfers in Nigeria. But the banks effectiveness in remittance distribution was questioned given itslow capitalization, inefficient management, and poor internal governance systems prior to 2005. Meanwhile, the effectiveness ofNigerian banking sector consolidation in 2005 which led to merger, recapitalisation and increased bank branches across the country in 2007 remained in doubt. Specifically, one of the key questions answered in this research was how has the role of remittances in welfare enhancement fared after the Nigerian banking sector policy of 2005?

Given the pooled sample of 24,009 households only 123 (0.5%) received international remittances and only 10 % (123) of the (1228) subsampled households were international remittance recipients. Analysis by other researchers in Nigeria and elsewhere present similar findings. For example, out of his sub-sample of 7931 households, only 0.37% (29) reported international remittances. Also, Ghanaian Living Standard Surveys showed that, 7.9%, 8.8%, 6.1% and 8.1% received international remittances in the period 1987/88, 1988/89, 1991/92 and 1998/99 respectively (Quartey, 2006). These statistics imply that relatively small proportions of populations receive remittances from abroad. Consequently, the main policy concern was “to what extent the huge sum received by few hands leads to increased welfare for the few recipients’ farm households as well as the mass of non-recipients farm households”. In other words “do the welfare effects of remittances (if any) spread beyond the remittance recipients farm households?” Interestingly, in contrast to this one, earlier works in Nigeria have not factored impact of international remittances on non-recipients households into their study of recipient households.

Although several studies as reviewed in chapter two portray that remittances reduce inequality of welfare, a few researchers including Adams (1991) and Taylor et al (2005) as cited in Quartey (2006) affirmed that remittances have positive effects on inequality. As a result, this study also attempted to answer the question, “do remittances reduce or enhance welfare inequality among farm households in Nigeria?”In an effort to answer this question Olowa & Olowa (2008) used Gini coefficient decomposition of inequality. However, Gini coefficient with an appeal for subgroup inequality decomposition at a medium level does not provide sufficient answer to the preceding research question. This work employed Theil Index with perfect decomposability which provided a clearer analysis of the inequality effects of remittances.

Finally, many researchers have a narrow definition of welfare and this misrepresents the results of most researches on welfare, this work adopts a broad-brush approach in the conceptualisation of welfare. It measured welfare by household per capita consumption; a sum of expenditure on households’ nutrition, health, housing, schooling, utilities, etc divided by the household size.

 

1.3       Research objectives

This study analysed the effects of migrant remittances on the welfare of farm household in Nigeria. In doing so, it:

  1. compared volumes of remittances received by farm household categories;
  2. analysed the effects of migrant remittances on farm households consumption;
  • established changes in farm household’s consumption due to remittances after Nigeria’s bank consolidation policy;
  1. estimated the effects of increased consumption spending by farm households who receive remittances on incomes of those who did not receive;
  2. evaluated the effects of remittances on consumption inequality;

 

 

1.4       Research hypotheses

The overall hypothesis examined in this study is that migrant remittances do not significantly influence farming household welfare in Nigeria. To achieve this, the following null hypotheses were tested:

  1. volumes of remittances received are not significantly different in households categories compared
  2. farming households consumption is not significantly influenced by remittances received
  • consumption of households due to remittances from abroad has not changed significantly after Nigeria’s Bank Consolidation
  1. consumption spending by remittance recipientfarm households have no significant effect on non-remittance recipients farm households’ income.
  2. remittances have no significant effect on inequality of consumption among the farm households.

 

1.5       Justification of the Study

World Bank (2008) submitted that Nigeria was the highest receiver of remittances in Africa and the thirteenth in the World. With US$3.329 billion remittances in 2005, Nigeria alone accounted for about 31% of total remittance flows to Sub-Saharan Africa. In 2006, Nigeria was the 3rd largest single recipient of remittances (US$ 5.397 billion) in Africa, with most migrants sending between 2000 and 3000 US$ (20 and 30 per cent of their earnings) per year (Ruiz-Arren, 2006). Remittances accounted for 3.4 per cent of the nation’s GDP and 7 times ODA in 2005 (IFAD, 2006).  Nigeria received US$1.92 billion as remittances in 1997, a value that is incomparable with the US$20 million received 20 years earlier (1977) (IFAD, 2006). Consequently, studies analysing the welfare effects of these huge funds flow in the hitherto poor Nigerian agrarian populace is justifiable.

This study constitutes a building block to filling the research gap on the effects of remittances on household welfare in rural Nigeria. Importantly, the study derived policy implication of its findings and it is being made accessible to policy makers in conferences and scholarly journals. This work when published is meant to generate facts that will translate actions of policy makers from that of speculation that of decision making. It is meant to provide them insight on appropriate course of action with respect to harnessing remittances for development. Governmental initiatives on remittances in Nigeria may learn from the policy implications of the results of this research. The research findings could be adopted during the revision of policy documents such National, State and Local Economic Empowerment and Development Strategies (NEEDS, SEEDS and LEEDS). National Poverty Eradication Programme; National Agricultural and Rural Development Bank; and Small and Medium Enterprises Development Agency could leverage on the research findings to broaden their programme for the poor.

Desiring Non-Governmental Organisations, including Nigerian Diaspora Associations could garner understanding of the remittance mechanism from this work. In doing so, it will enable them channel their developmental contributions properly.  Bilateral agencies collaborating with Nigeria in harnessing remittance for development will make reference to this study for an explicit idea on impact of remittances on Nigerian rural households. Multilateral donor agencies such as World Bank, IMF, IFAD, UNDP, USAID, DFID, etc, will have additions to their information bank from these research findings. It will provide room for similar studies so as to compare or validate results before applying them in remittances linked programmes.

Empirical evidences provided by this study lay bare areas needing further analyses by development, financial, welfare and agricultural economists. Stakeholders and the academia will have opportunity to read, listen to and discuss the outcomes of this research in its oral defence, academic conferences and workshops. Key aspects of the final work will be published in scholarly journals with copies made available to the university as reference material for research purposes.

 

1.6       Limitations of the study

This research proposed to draw data from the Harmonised Nigerian Living Standard Survey (HNLSS) 2009/2010 because of it was the most recent national survey and sampled large cross section agrarian households across the nation. However, data from this survey was unavailable during the data collection phase of this research because of its prolonged data cleaning process by the Nigerian Bureau of Statistics. As way of handling this limitation a pooled cross sectional data were therefore drawn from two alternatives: the Nigerian General Household Survey-Panel conducted in 2010/2011 and the Nigerian Living Standard Survey done in 2003/2004.Pooling these two cross sections reduced the problem of limited data volume that using only one of them could have caused.

However, a challenge of pooled cross sections drawn at different time periods were issues of multicolinearity and autocorrelation but these was handled by the fact that the two surveys were conducted independently, making  the pooled data an ideal cross section. Analysing pooled data of two time periods often create bias with respect to monetary values. In order to handle this limitation all monetary values (per capita remittances, per capita consumption and per capita and per capita income) were converted into their real values using 2005 price index. Accounting for remittance effects is often constrained by the problem of endogeneity and selectivity. Therefore, the nearest neighbour matching was adopted in selection of the comparative group, the non-remittance recipient households

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